EU antitrust probe of Apple iTunes Store pricing could open global market for digital music

Apple Store“A European antitrust probe into the pricing of Apple Inc.’s iTunes music downloads service could force the music industry to unravel the complex web of intellectual property agreements which allow music to be sold across the world, experts say,” Jessica Hodgson reports for MarketWatch.

“The investigation, which comes a day after Apple and EMI Group PLC said they have agreed to scrap digital rights management (or DRM) copy protection, opens up a new area of uncertainty for the industry, still fighting to contain piracy and to persuade consumers of the merits of buying music on the Internet,” Hodgson reports. “But some argue that the move could ultimately prove to be the catalyst the beleaguered industry requires to force a shift towards a genuinely open global market for digital music.”

“The Commission wants consumers to be able to shop around for the best prices for music downloads across Europe and objects, for example, to the fact that digital downloads in the U.K. and Demmark are more expensive than elsewhere in Europe. In a statement an E.U. spokesman said the focus of the investigation was primarily on the record companies who, he said ‘imposed’ variable pricing arrangements on Apple.”

Apple, whose iTunes service accounts for almost 80% of digital music sales worldwide, said in a statement Tuesday it had always wanted unified pricing but the music companies had advised that there were legal bars to operating an easier system,” Hodgson reports.

Hodgson reports, “Paul Jackson of Forrester Research says that although the E.U.’s stance could force the music industry into painful and complex negotiations, it may ultimately pave the way for a shift towards a genuinely open global market for digital music.”

Full article here.

Related articles:
EU says music labels force Apple to limit iTunes Store access – April 03, 2007
Apple, music labels face European Commission antitrust probe – April 02, 2007
EU says probe of Apple’s UK iTunes Music Store limited to pricing, not interoperability – March 22, 2006
European Commission probes charges that Apple iTunes Music Store is ‘ripping off’ UK consumers – February 25, 2005

16 Comments

  1. In a statement an E.U. spokesman said the focus of the investigation was primarily on the record companies who, he said ‘imposed’ variable pricing arrangements on Apple.

    They’re pointing at the record companies.

    Hopefully this will open the music stores into a global one and stop those idiot Americans blame the EU for whatever reasons they can find. Now EMI have said they will remove DRM, when will we see the backward American labels do the same?

  2. This will be nice for citizens of the EU, but there will still be different stores for the EU, the US, Canada, Japan, etc.

    What year again does Star Trek say the world government is coming?

  3. When it comes to music sales, everyone has their hand in the cookie jar. Each country has it’s own list of associations for artists, technicians, song writers, musicians, benevolent funds, et cetera.

    These people won’t give up their own little piece of the action without a fight.

    There will be no legal, global music stores.

  4. Eric,

    This is now the third time I’ve had to explain this, so – in the words of Basil Fawlty – please try and understand before one of us dies.

    The EU’s primary mission – above all else – is the delivery of a single harmonised, non-protectionist marketplace across the EU and, by extension and as far as possible, into the European Free Trade Area.

    In the Single Economic Area, companies may not prevent a consumer in the UK purchasing a product in another EU nation-state for the sole reason of preserving a differential in pricing between those nation-states given that there might be a disparity in purchasing power.

    One of the aims of this is to create a more uniform economy across the Single Economic Area, with money flowing from prosperous parts of the union to less prosperous areas that will, by implication, have a lower cost-base in terms of both direct employee costs as well lower indirect costs (land, social costs, etc.). It also ensures that companies cannot rig the market by only offering certain products in specific end-market nation-states.

    Apple’s iTunes (iTunes S.A.R.L is registered in the low-tax economy of the Grand Duchy of Luxembourg) is, as the most successful digital interface between the record industry and the consumers in the EU, effectively the de facto gatekeeper to the market.

    However, the European Commission (effectively the EU’s civil service) has previously indicated a degree of concern that the record industry is exploiting the diverse rights collection society structure in Europe to maintain prices at an artificially high level and that the duplication of rights collection societies in each nation-state acts as a barrier to the entry of alternative players in the market (remember the problems that Apple itself had cutting deals in each EU territory) and the subsequent development of a truly competitive digital download industry that operates in the interests of both rights holder and the consumer.

    The EU is probably also concerned that the imposition of restrictive DRM restrictions by the record companies (i.e. the requirement for the technology, as opposed to the technology itself) is designed to prevent the development of a fair and open market for digital entertainment by perpetuating the demand for physical product which, whilst also available under the terms of the Single Economic Area, is – by its very nature – less convenient than digital download and subject to packing, shipping and other ancillary costs thus mitigating the instant gratification that would be available by purchasing at your local entertainment store.

    The EU has a history of digging into a company’s paperwork to establish whether it is breaking EU law, including some very public raids on the offices of Volkswagen and Hoffmann LaRoche (which we mainly know as Roche Pharmaceuticals) and ferreting through some quite devious behaviour before finally nailing companies who want all the benefits of a single customs-union without any of the related liabilities.

    So, once again, Apple will – by virtue of being the main player – be the key focus of how the record industry and the rights-collection apparatus behaves in Europe, however I’d place good money that – when the fines start flying around – Apple’s name won’t be featuring very highly on the list. That said, I wouldn’t expect Apple to get away scott-free: it was, no matter how unwillingly, part of an abusive system so – unless it turns into a very friendly witness for the EU – it could still be looking at some substantial eight-figure fines.

  5. @MCCFR

    Your arrogance, hubris, envy, and contempt for all things non-European is showing. Zip up . . . and then, please-oh-please, retreat into fortress EU and try to develop something original for a change. Gawd but I am growing weary of complaint after complaint after complaint that the rest of the world isn’t treating you poor bastards fairly. One of these days you will have to save yourselves FROM yourselves once again; who will be there to rescue you THEN?

  6. JazzMan: Your arrogance, hubris, envy, and contempt for all things non-European is showing.

    He produced actual and – as far as I can tell – correct arguments and explanations of what is going on.

    You on the other hand have completely failed to produce anything even remotely reminiscent of an argument. None of what you’re blathering about is evident in his posts – only in your own.

    Apple has only to gain from these proceedings, even if they should also have to pay a fine (which would still be miniscule by comparison to their online sale revenue, and again miniscule compared to the improvements as a result of the removal of the restrictions).

    Comments like yours above only succeed in making yourself look like an idiot; They contribute absolutely nothing to an actually topical discussion.

  7. We can’t even send an iTunes gift certificate to another country. Apple can do that fairly easily I think, because no music has been purchased yet, so there shouldn’t be any labels complaining about that, but for some reason they won’t do it. After that, then hopefully the next step is to be able to purchase tracks from any country no matter whree you reside i.e. “global”.

  8. to the fact that digital downloads in the U.K. and Demmark are more expensive than elsewhere in Europe

    Of course, given the fact that the English Pound and the Danish Krone both fluctuate against the Euro, a £0.79 download may at some point be cheaper than a €0.99 download and that is something that has more to do with England’s refusal to join the Euro than a policy undertaken by Apple (though I will agree that £0.69 is closer to 1:1 with today’s exchange rates).

  9. how about opening up video content and
    getting rid of the idiotic REGION CODES on dvds.
    when digital distribution provides a single format
    that works on all computers worldwide, what a
    burden region codes will become… Blu-ray and HDDVD BETTER
    rethink their strategy if they are hinking of including these
    outdated shackles into their NEW format…

  10. JazzMan,

    Perhaps a little less caffeine might be an idea from now on.

    1) My original post clearly indicates the fault with the dispersed nature of the rights societies in each EU nation-state. Hubris? Arrogance? Don’t think so.

    2) My original post clearly points out that the EU has pursued other European companies, including a major car manufacturer (in the EU) and a pharma company (Swiss, therefore not even a member of European Economic Area, but still heavily involved in the EEA and – by implication – the Single Economic Area). Hubris to point out that European companies have been prosecuted in the past? How exactly?

    3) My post actually states pretty much all of the facts dispassionately and without any colour. I don’t believe I displayed any arrogance in so doing.

    4) There are actually only TWO American companies involved in this whole fiasco; Apple Inc. (who I would classify as a victim of the music industry’s fear, loathing and general incompetence) and Warner Music Group (who I would classify as a co-conspirator).

    However in regard of Apple; whilst they have probably been obstructed from realising the full potential of iTS because of the music industry’s obstructive character, they have also benefited because that very obstructiveness stops a new innovative player from entering the market: as a result, they have to think about their approach to any enquiry carefully.

    In closing, can I apologise for disturbing that chip on your shoulder. If I’d have realised quite how sensitive some of you Americans are about any form of commentary, I wouldn’t have wasted my time and effort trying to help people understand how the EU tends to look at things.

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